Feb. 26, 2008--The current credit crisis confirms
the old adage that the easiest way to rob a bank is to own one. Like spoiled rich kids,
the banking industry’s bad behavior is being rewarded by government
bailouts that we all pay for in inflation and taxes. Why do we still trust banks?
Nervous investors should beware the mythology that the safest
place for money is in bank CDs and savings accounts, or in paying down
their mortgages. Instead, people should consider stashing their
cash in the one investment that is like having your own private bank.
Anyone with cash to park should be looking at the investment that has
never failed: old-fashioned mutual whole life insurance, which
accumulates cash value the policyholder can borrow from, and earns
untaxed interest.
Like the Crash of 1929, and numerous meltdowns since, the current crisis
was caused by bankers who gambled with money they didn’t have on risky
investments, in this case “liar’s loan” mortgages.
Now that the chickens
have come home to roost, the banks and their stockholders are being
bailed out by the Federal Reserve while CEOs who presided over the mess
slouch away with millions. The real victims of this crime of the new century are not so much
homeowners who, in many cases, had little equity, but
the entire economy in the form of decimated stock market values which
have dragged down everyone’s retirement accounts and the ability of
businesses to raise capital to grow.
The general public still buys the fiction that government-insured bank
accounts are the safest place to keep your money, while distrusting the
stock market, where real value resides, or the mutual life insurance
industry, which survived the Great Depression intact while thousand of
banks went broke. Celebrity experts like Suze Orman who advocate paying down your mortgage
during times like these, are dead wrong.
The only thing worse than
putting your cash into a bank CD earning a pittance is accelerating the
pay-off of your mortgage. It’s the equivalent of lending your money to
the bank at zero interest, strengthening the bank’s balance sheet and
rewarding the perpetrator.
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to John Girouard
Institute for Financial Independence
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